Pension tax relief cuts to older workers to fund help for young

Pension tax relief could be cut for older workers to fund tax cuts for the young, as part of the chancellor’s plan to win over the younger generation, according to reports this morning.

According to The Daily Telegraph, No 10 is considering cutting National Insurance Contributions for workers in their 20s and 30s. This would be funded by reducing pensions tax relief for older earners, it said.

Such a policy would closely resemble an age-based pension tax relief system first talked about with New Model Adviser®by Hargreaves Lansdown last September.

Under Hargreaves' model tax relief, or more accurately a government top-up, for employee contributions on defined contributions pensions would be calculated as 100% of the money put in minus the individual’s age.

For a 26 year old, for every £10 they put into a pension, they would get £7.40 from the government.

According to the Telegraph’s report this morning, the chancellor will use his 22 November Budget to ‘restack the deck for the next generation'.

George Freeman, the head of the Prime Minister’s policy unit, told the paper: ‘We need to look at a new model of saving for a generation who will not benefit from the post-war model of national insurance.’

This will be Hammond's second major Budget set piece and second Budget in a year. He will be hoping any changes to NICs will also fare better than his attempt in the Spring Budget to increase class 4 contributions, which ran against a manifesto pledge not to raise NICs at all.

Changes to the pension tax relief system in the Budget were tipped by former pensions minister and Royal London director of policy, Steve Webb, who claimed in September that cuts were an almost certainty.

One hundred years after some women secured the vote, but a gender pay gap still exists across every occupation. This, combined with disrupted working patterns, also means women’s pension saving lags behind that of men.

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